Prefeasibility Study on Balkh Carpet Value Chain, Jan 2008.doc text version
ADB Rural Business Support Program (RBSP) Afghanistan
Prefeasibility Study
of Balkh Carpet Value Chain
May 2008
Report
Prefeasibility Study
Program
Project Funder
Poverty Reduction
Contract
30,2010
Program
Asian Development Bank
Program Officer
Development Specialist
Bank
May 2008
funded by Japanese Fund for
Ms. Donneth Walton
Senior Rural
Central and West Asia Department
TA9100 AFG
Contract Amount
Implementation Budget
Contract Period
Republic of Afghanistan
Implementing
Consulting
Asia Development
November 10,2007 to November
$5,644,000 Consulting Budget
Executing Agency
and Livestock Agency
Rural Business Support
$12,356,000
Ministry of Finance, Islamic
Ministry of Agriculture, Irrigation
Roots of Peace Organization
Report Authors
Kenneth Neils, PhD (Program Director), Roots of Peace, Vickie Sigman,
Extension Specialist, Roots of Peace
Roots of Peace
Larry Hendricks, Credit Specialist,
Alem Alemi, Deputy Team Leader, Roots of Peace
Abstract
This report is a prefeasibility study of the carpet value chain in Balkh
Province of Afghanistan.
The study focuses on the ability to positively
impact the overall carpet value chain with specific interventions.
This
publication was produced for review by the Asia Development Bank. It was
prepared by Roots of
Peace. The author's views expressed in this publication
do not necessarily reflect the views of ADB.
This Prefeasibility Study was produced by Roots of Peace under the ADBfunded
Rural
Business Support Project (JFPR 9100AFG). It was written by Dr. Kenneth
Neils, Acting
Team
with
assistance
Team
Leader),
Larry
Kuhn
Peace
a
from
Dr.
Hendricks
of
at
Roots
of
RBSP
Vickie
(Credit
the
Staff,
Sigman
Rural
including,
(Extension
Specialist).
Peace.
For
Business
Mr.
Alemi
Specialist),
Study
was
Roots
established
organization
in
1997,
based
focuses
in
on
Project,
Alem
(Deputy
and
Mr.
formatted
info@rootsofpeace.org or +1 415 455 8008.
notforprofit
more
The
Support
contact
Peace,
of
of
information,
humanitarian,
Roots
Leader
by
Roots
of
Gary
of
Peace
California,
postconflict
USA.
is
countries
promote
to
eradicate
economic
remnants
livelihoods
of
and
war
social
and
to
reestablish
and
programs. Roots of Peace is
funded by public and private sources.
CURRENCY EQUIVALENTS (as of 30 January 2008) Currency Unit
Afghani (Afs),
Rupee (Rs) Afs1.00 = $.05 $1.00 = 50Afs $1.00 = 62Rs ABBREVIATIONS ADB AKDN
AISA AREDP ARMP ASAP ASMED AWBF DAIL HLP MAIL MFI MISFA M&E MRRD NGO PFI
PHDP RBSP ROP SSPSRL TOT USAID Asian Development Bank Aga Khan Development
Network Afghanistan Investment Support Agency Afghanistan Rural Enterprise
Development Program Afghanistan Rural Microcredit Program Accelerating
Sustainable Agriculture Program Afghanistan Small and Medium Enterprise
Development Afghan Women's Business Association Department of Agriculutre,
Irrigation, and Livestock Horticulture and Livestock Program Ministry of
Agriculture, Irrigation, and Livestock Microfinance Institution Microfinance
Investment Support Facility for Afghanistan Monitoring and Evaluation
Ministry for Rural Rehabilitation and Development Non-Government Organization
Participating Financial Institutions Perennial Horticulture Development
Project Rural Business Support Project Roots of Peace Support to Strategic
Planning for Sustainable Rural Livelihoods Training of Trainers United States
Agency for International Development
WEIGHTS AND MEASURES kg ser Kilogram or kilograms 7 kilograms
NOTE (i) In this report, "$" refers to US dollars, "Afs"
refers to Afghanis, the currency of Afghanistan and "Rs" refers to
Rupees, the currency of Pakistan.
Balkh Carpet Value Chain Prefeasibility Study
3
CONTENTS
1.
EXECUTIVE SUMMARY
.............................................................................
.................... 5
2.
INTRODUCTION
.............................................................................
................................ 6
3.
VALUE CHAIN DESCRIPTION
.............................................................................
.......... 7
4.
MARKET ASSESSMENT
.............................................................................
................... 9
4.1.
Demand and Supply
.............................................................................
.................... 9
4.2.
Production Costs
.............................................................................
....................... 11
4.3.
Processing Costs
.............................................................................
....................... 12
4.4.
Marketing Costs
.............................................................................
......................... 12
4.5.
Price Trends
.............................................................................
.............................. 12
4.6.
Prices and Value Added Along the
Value Chain .................................................... 12
4.7.
Estimated Increase in Revenue
.............................................................................
. 14
5.
KEY CONSTRAINTS/GAPS
.............................................................................
............. 16
5.1.
Raw Wool
.............................................................................
.................................. 16
5.2.
Wool Scouring
.............................................................................
........................... 16
5.3.
Spinning
.............................................................................
..................................... 16
5.4.
Dying
.............................................................................
......................................... 16
5.5.
Design
.............................................................................
....................................... 16
5.6.
Weaving
.............................................................................
..................................... 17
5.7.
Finishing: Cut and Wash
.............................................................................
........... 17
5.8.
Marketing
.............................................................................
................................... 17
5.9.
Organization
.............................................................................
.............................. 17
5.10.
Credit
.............................................................................
..................................... 18
5.11.
Subsidies
.............................................................................
............................... 18
6.
OPPORTUNITIES
.............................................................................
............................ 19
7.
OTHER DONOR PROJECTS
.............................................................................
........... 21
7.1.
Carpet Sector Development: National Level
.......................................................... 21
7.2.
Training/Capacity Development
.............................................................................
22
7.3.
Existing Institutional Capacity
.............................................................................
.... 23
7.4.
Existing Groups/Associations
.............................................................................
.... 23
8.
CREDIT MAP: BALKH CARPET
.............................................................................
...... 24
9.
PROPOSED INTERVENTIONS
.............................................................................
....... 27
9.1.
Description
.............................................................................
................................. 27
9.2.
Strategic links to existing
programs
........................................................................ 28
9.3.
Stakeholders Interest in Value Chain Improvement
............................................... 28
10.
INDICATIVE NUMBER OF
POTENTIAL BENEFICIARIES ....................................... 29
11.
RECOMMENDATIONS
.............................................................................
................. 30
11.1.
Feasibility
.............................................................................
............................... 30
11.2.
Cost Effectiveness
.............................................................................
................. 30
11.3.
Risk Manageability
.............................................................................
................. 30
11.4.
Financial Viability
.............................................................................
................... 31
11.5.
Environmental Issues
.............................................................................
............. 31
ANNEX 1: VALUE CHAIN FOR BALKH CARPET
................................................................ 32
ANNEX 2:
CREDIT MAP: BALKH CARPET
......................................................................... 33
Balkh Carpet Value Chain Prefeasibility Study
4
1. EXECUTIVE SUMMARY
One of the principal provinces in Afghanistan where carpets are made is Balkh
province.
Balkh
Approximately
There
are
has
a
long
onefourth
over
1.7
of
and
all
million
rich
history
villages
square
in
meters
of
carpet
Balkh
of
weave
carpets
weaving.
carpets.1
produced in
Balkh and the northwest provinces. There are over 100,000 families in this
region
involved in producing carpets. Although the Afghan handmade
are the
prize export of Afghanistan, much of the value added is lost to
Pakistan.
Pakistan
carpets,
including
receives
a
similar
an
estimated
80%
to
95%
of
Afghan
percentage from Balkh. Carpets are then
finished and reexported as Pakistani carpets.
Pakistan brands Afghan carpets
and exports onwards, primarily to Europe and the USA.
The great majority of
Afghan handmade carpets go through Pakistan due: (i) to the lack
sufficient
cut
and
wash
longterm
relationships
partners
and
limited
partners,
to
carpets
with
trading
(iv)
facilities
Pakistanis
their
Afghanistan,
have
established
international
relationships
to
in
relatively
trading
between
low
Afghans
cost
of
(ii)
with
partners,
and
shipping
of
to
the
their
Afghan
(iii)
to
international
from
Afghanistan
Pakistan versus high cost of shipping from Afghanistan to international
markets, and (v)
Pakistan's
advantage
in
that
the
Pakistan
Government
subsidizes
has
an
Pakistan's
opportunity,
carpet
if
it
industry.
gets
The
better
Afghan
carpet
organized,
to
industry
capture
more of
the value of its prized carpets by adding value to the wool that is used for
its
carpets and by establishing its own proper cut and wash facilities and
direct marketing
when
they
capability.
are
buying
wool
Afghan
in
traders
are
and
bang
for
weavers
the
all
high-quality
buck”.
have
a
opportunistic
Pakistan or in Iran. The wool traders are
not necessarily looking for the same wool that
“best
quite
Afghan
stake
in
wool
the
would
give
cleaners,
carpet
the
spinners,
industry.
weaver
the
dyers,
They require
inputs. Overall, the wool and carpet value chain in Afghanistan
requires the quality and the demand driven incentives to be captured by the
Afghan producers. The feasibility of cut and wash facilities has been
investigated and the results indicate a very high return.
marketing
of
carpets
branded
by
Afghan
exporters
The
also
potential as long as the shipping costs can be managed.
the
weavers
of
Balkh
need
a
chance
to
access
direct
has
In
their
tremendous
addition,
own
inputs
independently, own their own looms, learn about the designs in most demand,
establish
Afghan
cut
and
exporters
wash
with
facilities,
direct
and
linkages
send
to
their
carpets
lucrative
markets.
through
These
value-added activities are feasible and if implemented could lead to very
significant increases in income to stakeholders working within the value
chain in Balkh.
1
Ministry of Rural Rehabilitation and Development (MRRD). 2007. Feasibility
Study for Carpet Subsector Plan: Operationalizing Cut and Wash Facilities.
Kabul: MRRD.
Balkh Carpet Value Chain Prefeasibility Study
5
2. INTRODUCTION
Afghanistan
countries,
has
had
producing
a
long
hand woven
tradition
carpets
in,
made
and
from
is
one
wool,
of
few
cotton,
and/or
silk.
Prior
to
the
1990's,
Afghanistan
was a very important
player in the global carpet market. Over the period 1990
war
and
civil
nor
internationally
Pakistan.
strife,
The
Afghanistan
and
revival
lost
of
was
its
the
not
share
able
of
2002,
to
the
export
market,
regionally
largely
involved
cut
wash operations, and design development1. While figures vary
supporting
activities
such
as
wool
production,
the Ministry of Commerce, International Trade
Department, based on CSO data indicate
Afghanistan
annually
through
average
$176
formal
to
additional
millions
widely, information from
the
estimates there are over one
million Afghans working in the production of carpets with
and
to
carpet industry in Afghanistan began in
2002. The Afghanistan Carpet Exporters Guild
in
due
market
channels,
an
of
exported,
million worth of
carpets over the period 20032006. Of this, annual exports estimated at $164
million went to
Pakistan
through
formal
market
channels.
This official
estimate underestimates the actual carpet exports. If the informal trade of
carpets is included, it
has been estimated that Afghanistan produces
annually about 6.6 million square meters
which
are
exported.2
The
value
of
of
6.6
handmade
million
carpets is at least twice the official data.
Afghanistan
are
viable
visible
focus
and
for
globally
both
acknowledged
products
and
one
become
major
most
development
producing areas of carpets is Balkh. Balkh
has a long and rich history of carpet weaving.
villages
in
Afghanistan's
a
of
meters of
carpets
of
most
Afghanistan's government and private sector support
organizations.3 One of the major
all
square
The
as
have
carpets,
in
Balkh
weave
carpets.4
Approximately
There
are
over
onefourth
1.7
of
million
square meters of carpets produced in Balkh and the northwest provinces. There
are
over
carpets.
100,000
The
families
average
carpet
weaver
meters
of
homes.
Because
so
impact
of
income
the
strongly felt.
in
per
year.
many
this
in
involved
Afghanistan
in
produces
producing
about
18
square
The weaving is done mostly by women in
women
these
region
are
women
involved
bring
to
in
weaving,
their
the
their
economic
households is
This document presents information collected from field
trips in Balkh province, from donor project documents, and from discussions
with various Kabul based stakeholders.
1
the
provides
a
development
summary
of
of
this
the
study.
The
findings
At
the
schematic
of
top
the
of
presented
field
the
work
in
ANNEX
leading
schematic
is
to
a
brief
outline of the value chain. The horizontal sections below the outlined
value chain set out
improvement
and
the
constraints/gaps,
suggested
opportunities
for
value
chain
strategic interventions for the RBSP program.
The remainder of this study provides the
information and prefeasibility
analysis of interventions in the carpet value chain.
2
Landell Mills, Ltd. 2007. Preparing the Commercial Agricultural Development
Project, Main Report, Phase 2. Asian Development Bank Project. 3 McCord, M.
May 2007. An Analysis of Business Opportunities within Afghanistan's Carpet
Sector. Kabul. 4 Ministry of Rural Rehabilitation and Development (MRRD).
2007. Feasibility Study for Carpet Subsector Plan: Operationalizing Cut and
Wash Facilities. Kabul: MRRD.
Balkh Carpet Value Chain Prefeasibility Study
6
3. VALUE CHAIN DESCRIPTION
There are many steps in the carpet value chain. The initial steps involve
obtaining the
the wool
of
sheep.
purchasing
the quality and source of raw wool needs to be considered and is
contingent
Some
proper quality and volume of wool, including:
on
the
The
fibers,
the
breed
best
wool
of
wool
is
for
sheep
and
carpets
highlyprized
availability,
comes
for
its
from
respectively.
Afghanistan's
Ghazni
texture, long length
and for its high proportion of white wool. Other wool of
of
various
quality types originates from the Middle East and is imported from Pakistan
or
Iran.
washing the wool
scouring. Wool scouring
nonwool contaminants.
wool)
by
spinning
brushing
the
wool
or
by
machine.
on
handspinning
Raw wool requires proper washing, that is,
uses hot water with detergent to remove the oil and
carding/combing
the
wool
into
Even
yarn
though
wheels,
has
desired for highquality carpets.
fibers
by
with
hand,
handspun
an
(following
the
drying,
of
the
wire teeth to align the fibers.
by
use
yarn,
of
which
spinning
includes
wheels,
yarn
spun
uneven structure, this look is frequently
dying
the
wool,
an
intricate
process
requiring
and
extensive
pH)
of
used.
dyes
Most
from
carpet
knowledge
and
and
colors.
carpet
Both
weavers
traders
and,
experience
chemical
obtain
their
as
well
as
temperature
and
dyes
natural
wool
and
other
are
inputs
therefore, are not involved in the above steps.
The traders also provide carpet designs
designs,
(controlling
the
to
contemporary
the
weavers.
designs,
The
reflect
traditional
buyer
preference, and are graphed, showing both color and pattern. Graphing is done
by
hand
in
is
famous
Northern
madeup
more
Pakistan
for
"Chob
typically
carpets
patterns
are
based
on
floral
Carpet
receive
their
on
master
graphers.
design,
woven
Traditional
dark
red
carpets
are
in
or
pastel
mainly
Turkmen
in
design
burgundy
woven
Afghanistan
base.
with
is
The
natural
colors.
Afghan
Kazak
traditional Caucasian designs and woven with good
weavers
loom
a
designs
quality wool yarns, much of which
dyes.
Balkh.
Rang"
having
by
Turkmen
including
geometric
recent
Afghanistan
traditional
Afghanistan,
of
dyes,
its
and
may
from
has been dyed using natural vegetable
have
the
their
own
loom
or
they
may
carpet trader. Depending on the size of the
loom, up to five people can work together on
a single carpet. Wooden or
steel, horizontal or vertical, looms ranging in size from 2 to
25 meters
square. An expert weaver can produce around two square meters of carpet
per
month,
in
the
although
design
and
this
varies
40
the
density
of
knots
required
with the experience of the weaver. There are three major
standard densities, measured
are: 35 x 35,
with
as number of knots per 10 cm squared.
x 40, and 50 x 50. The
These
higher the density, the higher the
quality and price of the carpet.
The cut and wash process following weaving cleans the carpet, restores the
original shine of the wool, and brings out the carpet's sheen and luster.
There are three types of washing that produce carpets of different degrees
and luster. These are:
Antique wash gives an old look to the carpet
Balkh Carpet Value Chain Prefeasibility Study 7
Tea wash gives a shiny look
After
the
carpet
shaved)
to
traders
who
carpets,
in
a
dried
uniform
have
the
carpet's
level.
to
weavers
Pakistan.
Traders
surface
Marketing
contracted
primarily
Afghanistan.
loom,
is
Simple wash gives an original color look
to
is
contract
and
weaving
weavers,
cut
(clipped
or
largely
by
accomplished
weave
Contract
is
who
is
then
very
providing
sell
widespread
them
with
the
yarn, and design, and pay them a per meter wage ranging from $31
depending on
carpets,
typically
linked
have
to
$50
intricacy of design, knot density, quality, and size of carpet.
Some weavers are paid up to
density
the
this
contracts
end
independently
but
buyers
sell
$79
in
their
per
is
meter
very
with
for
unusually
infrequent.
Pakistan
buyers,
international
high
Merchants
who
markets.
are
Some
knot
themselves
directly
weavers
carpets in local markets.
Balkh Carpet Value Chain Prefeasibility Study
8
4. MARKET ASSESSMENT 4.1. Demand and Supply
4.1.1. Demand
By Product Type
This report focuses on handmade knotted carpets. Demand
for the carpets is dictated by
make (wool, cotton, and/or silk), design,
wash type, quality in terms of number of knots
European
market
prefers
carpets
Wash
technique,
whereas
the
been
Tea Washed.
study referenced
that
American
are
location
Simple
that have
The OTF
carpet
trading,
Local and Provincial
networks,
and
Mazar
services
with
indicating 90% of carpets produced in Balkh transfer through Mazar
to Pakistan.
National
domestic
Afghanistan.
demand
Reports
are
purchased in Afghanistan5.
direct
carpets
The
in this study has a detailed description of the demand for
for
limited
etc.
the
The Antique wash has a niche in both markets.
is
estimates
inch,
using
market prefers
By Geographical Location
key
square
finished
handmade carpets.
a
per
demand,
Pakistan
Relative
for
to
carpets
that
around
domestic
at
8%
the
of
demand,
nationallevel
Afghan
an
estimated
80%
is
in
carpets
Regional and International
receives
there
are
Although
to
95%
of
not
a
Afghan
carpets. Carpets are then finished and reexported as Pakistani carpets.
Pakistan brands
Afghan carpets and exports onwards, primarily to Europe and
the USA. This is due: (i) to
the
facilities
in
(ii)
Pakistanis
have
their
Afghanistan,
established
international
relationships
relatively
low
with
trading
between
cost
to
of
longterm
their
and
shipping
sufficient
the
partners,
Afghans
of
lack
Afghan
(iii)
and
to
wash
relationships
partners
and
limited
international
from
cut
trading
partners,
Afghanistan
to
with
(iv)
to
Pakistan versus
high cost of shipping from Afghanistan to international markets, and (v)
Pakistan's
advantage
Pakistan's
carpet
in
that
industry.
the
Pakistan
Government
subsidizes
Reports state there are over $1.4 billion in
carpet sales on the world market each year.6
Around 70% of global demand for
carpets is from five countries: United Arab Emirates,
Italy, Germany, USA,
and UK7. The USA and Germany purchased $531 million and $300
of
the
carpet
in
2004.
The
US
demand
grows
slightly
million
annually,
German demand has fallen rapidly over the period 1998
worth
while
2004.
5 6
7
OTF Group. 2006. Afghanistan Competitiveness Project Key Documents Library:
Volume 2. Kabul. McCord, M. May 2007. An Analysis of Business Opportunities
within Afghanistan's Carpet Sector. Kabul. OTF Group. 2006. Afghanistan
Competitiveness Project Key Documents Library: Volume 2. Kabul
Balkh Carpet Value Chain Prefeasibility Study
9
For Close Substitutes
-are
The
increasingly
method
of
Machinemade
becoming
production
more
is
carpets--from
attractive
reportedly
way the product is styled and colored.
4.1.2. Supply
now
to
Iran,
China,
international
less
and
India-
buyers.
important than the
By Product Type
This study focuses on handmade knotted carpets. The supply
of carpets is limited by the
handmaking
the
carpets
if
weavers
would
carpets.
they
had
time
Some
that
if
they
could
are
produced
(namads/lamsai)
represent
a
and
in
flat
learn
small
carpets
widespread
has
in
increasing.
more
weaving
of
floor
carpets
However,
these
used in the homes of the weavers who
By Geographical Location
Local
Discussion with officials in Balkh and in several districts
in Balkh confirms that Dawlat
and
good
types
wool
to
potential
about
(kilims).
produce them. Rarely are they exported.
weaving
weave
New
other
devote
percentage, about five percent, of all floor coverings
produced in Afghanistan8. Most are
and Provincial
more
Two
to
would
looms.
Afghanistan--felted
woven
have
weavers
better
techniques and could afford the loom.
coverings
weavers
experienced
differentsized
weave,
the
the
highest
Dehdadi
The
Abad
and
Ministry
is
number
Nahri
of
the
Rural
district
most
wellknown
of
weavers.
Weaving
is
Shahi,
although
its
importance
Rehabilitation
and
Development
for
less
is
(MRRD) National AreaBased Development Program has been instrumental in
assisting
districts develop their district development plan. District
Development Plans for Dawlat
mention
the
positive
Abad,
impact
of
Dehdadi,
carpet
and
Nahri
weaving
Shahi
each
activities in their
district on the economy of the district. Most carpets produced in Balkh
shipped
of
to
carpet
Pakistan
via
Mazar.
While
unavailable.
information
on
amount
districtlevel information is currently
It is widelyheld that Balkh is one of Afghanistan's most
important provinces for carpet
production.
square meters of carpet were exported
through formal market channels.9
of
is
shipped to Pakistan from Mazar, this information is not
disaggregated by district. Thus,
Agency
there
are
Afghanistan
from
Estimates are that 1,700,000
Mazar to Pakistan in 2005
National
suggests
annual
The
production
Export
to
be
Promotion
in
the
area
of two million carpets with an average size of 3.2 meters square. This
results in an
carpet.
8 9
annual
Adjusting
estimate
this
figure
of
around
6.4
million
square
meters
of
OTF Group. 2006. Afghanistan Competitiveness Project Key Documents Library:
Volume 2. Kabul. Landell Mills, Ltd. 2006. Preparing the Commercial
Agriculture Development Project: Phase 1 Report. Kabul.
Balkh Carpet Value Chain Prefeasibility Study
10
based on more recent data from Mazar, Herat, Kabul, and Andkhoy, results in
an annual
the
estimate of 6.6 million square meters.10
largest
Afghanistan.
While
supplier
of
Table
shows
Afghanistan
1
appears
carpets,
top
followed
suppliers
third,
while
being
based
Pakistan
on
Iran
is
and
value
of
exports.
Afghanistan supplies significantly more
carpet than the table suggests because much of
underreported
by
Regional
exported
to
its
Pakistan
production
where
it
is
is
re
exported as Pakistani.
Table 1. International Carpet Market: Top Suppliers Carpet Exports Country
(Millions $) Iran 391 Pakistan 246 Afghanistan 149 India 148 China 121 Nepal
100
Source: OTF Group. 2006. Afghanistan Competitiveness Project (Key Documents
Library: Volume 2. Kabul)
Of Close Substitutes
Afghan
handmade
carpets
China,
and
from
Iran,
carpets
is
less
important
with
machine-made
India. The supply of machine-made carpets
continues to grow and as mentioned above,
production
compete
than
how
reports
the
indicate
carpet
is
the
method
of
styled and
colored.
4.2. Production Costs
The margins represented in the value chain for carpets exported from Balkh to
Pakistan and then on to the European market are given in the following table:
Table 2. Carpet Value Chain Activity Raw wool Dying Weaving Transport to W/S
market Wholesale price Transport to Peshawar Cut and wash repairs Wholesale
Peshawar Transport to Europe Wholesale Europe Retail EUROPE Margin (Rs) 999
245 2759 150 2495 92 300 104 1033 61 1778 1839 Margin ($) 16.30 4.00 45.01
2.45 40.70 1.50 4.89 1.70 16.85 1.00 29.00 30.00
Source: Landell Mills, Ltd. 2006. Preparing the Commercial Agriculture
Development Project (Phase 1 Report. Kabul)
10
Landell Mills, Ltd. 2006. Preparing the Commercial Agriculture Development
Project: Phase 1 Report. Kabul.
Balkh Carpet Value Chain Prefeasibility Study
11
The graph of the margins within the value chain for carpets is given in
Figure 1 below. 4.3. Processing Costs
Cut
and
meter
wash
in
processing
Pakistan.
costs
are
the
silo
high
quality
at
$8.00
per
square
There are cut and wash facilities in Kabul, Mazar, and
Herat. The quality of these varies,
near
estimated
in
Mazar,
services,
run
but
by
although
is
the
at
generally
Naim
higher
low.
Company,
prices
One
service
reportedly
than
its
offers
local
competitors.11 There are indications that cut and wash in Afghanistan ranges
from $4
$7 USD per square meter.
4.4. Marketing Costs
Transport
from
destinations
is
Kabul
to
Pakistan
lower,
onwards
to
international
one marketing cost. Costs from Kabul to Pakistan are
between $6.50 and $7.00. Costs of
much
and
estimated
at
transport
around
$3.00.
from
This
Pakistan
is
to
UK
are
largely because the
former is by truck/road and the latter by container/sea. Afghanistan
exporters would have an advantage shipping to the US in that carpets may be
shipped to
the USA duty free. Considerable investment is required to develop
and expand markets
marketing
costs
and
are
advertise
covered
products
largely
internationally.
Currently,
by the Pakistani traders, but there
are reports that the Pakistan Government subsidizes
the container shipments
of its carpets.
4.5. Price Trends
International
inflation
prices
rates
of
for
carpets
the
generally
follow
and Germany grew by
respectively. In general, international prices
market
and
prices
have
followed
about 3% and 7%,
for carpets steadily grew
with the low inflation rates in these countries.
in
growth
major international economies. Over the period
20022004, the carpet market in the US
trends
the
the
More
specifically,
quality,
styles,
the
and
colors demanded by the international market. The best growth in carpets
accompanied
by higher prices has been in the soft contemporary designs. The
market for high quality,
traditional carpets is not growing, but slowly
losing out to the contemporary style. The
has
become
less
popular,
with
a
market
sales
for
decline
Chob
of
Rang
25%
carpets
having taken
place in recent years.12
4.6. Prices and Value Added Along the Value Chain
The price of wool varies
the market
Carpets for the local market at the bottom end of
use Iranian wool costing about US$1.00 per kilo. The finished
carpet sells for about $25/
m². On the high end, `Belgique' wool, imported
machine spun wool, retails for US$6.00
carpet
sells
for $about as
much
to US$7.00 per
as $150/ m². Part of
kilo. The finished
the difference in
the costs is from the price of the wool and the other is from the knot
density,
finer
and
which
the
is
knot
higher
with
the
imported
wool,
as
the
wool
is
density is 55 x 60 per 10 cm.
11
MRRD. 2007. Feasibility Study for Carpet Subsector Plan: Operationalizing Cut
and Wash Facilities. Kabul: MRRD. 12 OTF Group. 2006. Afghanistan
Competitiveness Project Key Documents Library: Volume 2. Kabul
Balkh Carpet Value Chain Prefeasibility Study
12
Besides
the
dictated
wool.
The
prices
by
the
price
of
the
number
paid
of
to
inputs,
knots
the
the
per
weaver,
prices
10
cm
minus
of
and
input
carpets
by
the
are
type
of
costs is given in
Table 3.
Table 3. Cost Structure and Percentage of Carpets Woven Item 30-35 double
knots 35-50 double knots per 10 cm per 10 cm (Iranian wool) (Iranian wool)
US$ US$ Cost per m² 25-30 40-50 Percent of total 25 percent 40 percent
carpets woven
Note: Carpet prices are also lower by 10% or more for carpets that have
flaws.
50-60 dbl knots per 10 cm (Belgium wool) US$ 100-120 35 percent
Most
woven
carpets
and
are
before
exported
from
Afghanistan
after
they
have
been
they are cut and washed. Most Afghan carpets are cut and
washed in Pakistan and then
marketed to international markets. The prices
for the different quality of carpets in the
US are given in Table 4.
Table 4. Price Structure for Different Grades of Carpets in US$13 Knot
Density Best Good 35x40 90 85 40x40 107 98 50x50 131 115 Bad 74 79 82
Note: Where Best represents the top style, excellent quality, and preferred
color; Good represents less popular style, good quality, and average color;
Bad represents relatively unpopular, fair quality, and poor mix of colors.
Landell Mills, Ltd. 2007. Preparing the Commercial Agricultural Development
Project, Main Report, Phase 2. Asian Development Bank Project.
13
Balkh Carpet Value Chain Prefeasibility Study
13
The graph of the margins within the carpet value chain is given in Figure 1.
Figure 1: Carpet & Wool Value Chain Margin in US$
Figure 1: Carpet & Wool Value Chain Margin in US$
250.00
200.00 Retail Europe Wholesale Europe 150.00 Transport to Europe Wholesale
Peshawar Margin in US$ repairs Cut and wash Transport to Peshawar Wholesale
price Transport to W/S m arket 50.00 Weaving Dying Raw wool 0.00 1 Activities
100.00
4.7.
Estimated Increase in Revenue
The project will provide technical assistance and training (in accessing
quality inputs, in
flaws
in
year
weaving)
period.
their
about
trained
because
preferred,
three
to
The
carpets
more
developing
weavers
and
per
demanddriven
designs,
600
households
weaving
weavers
the
the
will
carpets
inputs
receive
do
are
not
of
correcting
over
$5/sq.m.
have
higher
in
flaws,
the
two
more
for
the
quality.
all
design
is
Assuming
household with an average production of 18 square meters
per weaver, the estimated
increase in revenue is $162,000.
Many weavers
do not own their own looms; instead they pay the traders who rent them
looms
for $4/sq.m. of carpet. Through the support of the Project, two hundred
weavers
will purchase steel looms on credit. The average weaver household
produces 54 sq. m.
of carpet per year. The estimated increase in revenue for
the 200 weavers is $43,200.
many
weavers
in
the
Balkh
Many
people
districts
who
are
hand
spin
wool
including
spinning 0.2 kg of wool
per day and receiving $0.63 kg/day. The Project will assist 200
spinners
who
using
are
spinning
interested
in
wheels
in
purchasing
and
wheels to increase their spinning to 1.2 kg/day. The increase in
rate of spinning is 0.9
wheels
spinning
for
300
kg/day.
days/year,
the
If
the
200
estimated
spinners
use
the
spinning
increase in their revenue is
$43,020.
The Project will assist two investors in establishing two cut
and wash facilities in Balkh
washing at
province each
with a capacity
for cutting and
least 90,000 sq.m. of carpets
Balkh Carpet Value Chain Prefeasibility Study
14
per
annum.
cut
and
will
Instead
wash,
be
cut
of
it
and
is
the
estimated
washed
per
$5.50/sq.m. is $990,000.
Project
sq.m.
will
of
assist
carpets
Balkh
that
annum.
Once
the
carpets
the
being
approximately
to
Pakistan
180,000
sq
for
meters
The estimated increase in revenue at
carpets
carpet
exporters
to
international
directly
sent
are
in
cut
and
exporting
markets
washed,
the
the
180,000
bypassing
Pakistan. By eliminating Pakistan from the value chain, the Pakistan
exporters will save
increase
in
at
revenue
2,880,000.
least
from
$16
of
marketing
gross
the
revenue.
The
estimated
180,000 sq.m. is about
The total estimated revenue from the Project interventions is
$4,046,130.
Balkh Carpet Value Chain Prefeasibility Study
15
5. KEY CONSTRAINTS/GAPS
While
Pakistan
Afghanistan's
represents
a
prime
constraint
to
the
improvement
of
position in the global value chain, Pakistan also provides
inputs and services currently
in short supply in Afghanistan. This is the
foremost challenge facing the Afghan carpet
industry. Other specific
constraints and gaps in the value chain are discussed below.
5.1. Raw Wool
Local Ghazni wool, considered of very high quality, accounts for about 15% of
wool used
in Afghanistan.14 Because demand is greater than supply,
Afghanistan imports raw wool,
primarily from Pakistan.
5.2. Wool Scouring
A growing concern for the environment has led to increased demands on the
scouring
process.
environmental
Afghanistan
Improved
concerns
wool
is
technologies
related
scoured
to
are
wool
using
available
scouring.
traditional
to
address
However,
in
processes. There are
currently no improved facilities for wool scouring in Afghanistan.
Few
merchants have adequate space for drying and storing wool.
5.3. Spinning
Wool is traditionally handspun in Afghanistan. There are few small wooden
spinning wheels in Afghanistan and most weavers have reportedly never used
spinningwheels.
Much of the yarn used in Afghanistan is imported, already
spun, from either Pakistan or
Iran although Mazar has one private yarn
producing company. The company has been in
years
and
imports
wool
from
Iran,
operation
Uzbekistan,
for
and
the
past
three
Pakistan.
5.4. Dying
There
yarn
are
is
Dying
a
number
dyed
is
of
using
becoming
smallscale
natural
a
lost
facilities
dyes.
art
However,
and
in
Afghanistan
there
are
few
Pakistan
where
Balkh.
medium or largescale
factories in Afghanistan dying wool using natural dyes. There are
in
in
materials required for natural dyes
are becoming more difficult to source. There are no
factories
where
chemical
dyes
are
used
to
largescale
produce
large
quantities of dyed yarn. Afghanistan imports much of its dyed yarn from
Pakistan and
Iran.
5.5. Design
Reports
are
constraint
Afghan
that
in
weavers
the
the
via
time
carpet
required
weaving
Pakistan,
to
hand
process.
again
tying
As
copy
well,
designs
designs
within
making
changes
difficult
for
Afghanistan
to
international market preference and demand.
a
come
to
Afghan traders and weavers to
Pakistani merchants. There is a lack of design expertise
it
is
respond
to
Afghanistan
in
14
MRRD. 2007. Feasibility Study for Carpet Subsector Plan: Operationalizing Cut
and Wash Facilities. Kabul: MRRD
Balkh Carpet Value Chain Prefeasibility Study
16
5.6.
Weaving
Contract
weavers
dictated
by
incentive
that
those
than
weavers
often
have
with
whom
required
who
have
no
to
alternative
they
contract
produce
their
own
to
accepting
and
may
high quality
looms
are
have
carpet.
paid
conditions
less
Reports
around
are
$4.00 more
per square meter for their work than weavers who are provided looms by
their
contractor. As well, there are indications weavers who purchase their own
inputs
can make more money, but this assumes they can sell their carpet at
good price and few
weavers are directly linked to good markets. Quality is
an important issue for weavers
and traders alike. Weavers who produce poor
quality carpets receive less money (2000
produce
high
negotiating
quality
capacity
carpets
and
(3500
Afs/sq
Afs/sq
organization
to
meter)
meter).
than
those
Weavers
advocate
for
who
lack
better
wages,
working conditions, and/or initiate direct marketing. Although Balkh has a
tradition of
producing high quality carpet, the handmade carpet industry is
very competitive, with
market shares contingent on production of high
quality products.
5.7. Finishing: Cut and Wash
Reports
suggest
Afghanistan
10%
with
finishing.15
There
to
the
are
20%
large
a
of
Afghan
majority
few
cut
carpets
are
finished
in
to
Pakistan
for
transported
and
wash
facilities in Mazar, Herat,
and in Kabul. In Mazar, there are a total of ten facilities. These
provide
finishing
these
services
for
Afghan
customers
and
the
quality
of
operations,
is
with
considered
services,
a
to
few
be
although
exceptions,
competitive,
at
a
higher
is
low16.
providing
cost
Out
high
than
the
of
the
quality
other
ten,
one
finishing
operations.
Pakistan's weather is a comparative advantage in cut and wash compared to
most
carpet
carpets
parts
making
in
of
cold
locations
weather,
Afghanistan
a
in
Afghanistan.
condition
which
exists
in
It
the
is
difficult
central
and
northern
expertise required to
add value via cut and wash processes. Chemicals required for cut
imported
increasing
There
is
from
the
Pakistan
cost
little
of
work
and
cut
have
and
being
done
dry
anywhere from four to six months of
the year. Few Afghans have the technical skills and
are
to
a
wash
on
short
shelflife,
operations
in
and
wash
thus
Afghanistan.
identifying better sources of
chemical or better chemicals for the cut and wash process.
5.8. Marketing
As earlier mentioned, the handmade carpet industry is highly competitive.
Cuttingedge
marketing skills, linkages, and technologies are needed to
enable Afghan merchants to
successfully compete. Few Afghan traders are
linked to international markets. Few are
able to direct market over the
internet. Most are tied to buyers in Pakistan. There is an
almost complete
lack of branding of Afghan carpets as most are exported as a Pakistani
product.
5.9. Organization
There are two large trader organizations operating in Balkh. While they
represent large
below,
and
their
they
lack
numbers
of
professional
the
traders
and
weavers,
organizational
expertise
required
and
as
business
further
skills
detailed
are
weak
to
15
MRRD. 2007. Feasibility Study for Carpet Subsector Plan: Operationalizing Cut
and Wash Facilities. Kabul: MRRD. And McCord, M. May 2007. An Analysis of
Business Opportunities within Afghanistan's Carpet Sector. Kabul. 16 Ministry
of Rural Rehabilitation and Development (MRRD). 2007. Feasibility Study for
Carpet Subsector Plan: Operationalizing Cut and Wash Facilities. Kabul: MRRD.
Balkh Carpet Value Chain Prefeasibility Study
17
trade
effectively
in
there
are
groups
weaver
weaverrelated
issues.
the
international
in
Balkh,
However,
most
market.
concerned
are
There
are
primarily
indications
with
reportedly small and few are
wellorganized.
5.10. Credit
Traders
report
constraints
in
their
cash
flow
weavers
working.
Weavers may
need credit
other inputs. All
advise they
lack access to credit. This is not only a
to
to
keep
contract
purchase new looms
function of credit availability, but of their ability
to obtain credit and their concerns over what they
or credit
consider high
and/or
worthiness
interest
rates as well as their concerns about loan repayment.
5.11. Subsidies
The
Pakistani
the
Union
government
subsidies
its
carpet
industry.
For
example,
President maintains the Pakistani Government provides a bonus to
its traders of $5,000.
for every 40 foot container of carpets shipped out of
Pakistan. Afghan merchants believe
these types of subsidies put them at a
distinct disadvantage and they frequently request
assistance.
Balkh Carpet Value Chain Prefeasibility Study
18
6. OPPORTUNITIES
some type of government
The Afghan Investment Support Agency (AISA) is a onestop shop supporting
investors.
They have studied investment opportunities in the carpet industry
advising:
"Wide opportunity exists for investors to add value to their products by
controlling the highly profitable activities closest to the end customer. It
is estimated that the value of Afghanistan's entire carpet industry would
increase between two and five times if companies finished goods in country
and sold directly to overseas markets, rather than exporting through
intermediaries. Handling all aspects of production within Afghanistan would
allow for enhanced quality and a revitalized, "Made in Afghanistan"
brand of carpets marketed for export worldwide. Along the supply chain,
investment opportunities include: wool production, dye manufacture, carpet
finishing, international marketing services, and transport and
logistics."17
The
Afghanistan
project
Small
and
Medium
Enterprise
Development
(ASMED)
conducted a review of the carpet sector and identified investment
opportunities in the
sector.18 The table below draws on ASMED data,
already referenced, and field
sources
work conducted for this study.
Table 5. Constraints/Gaps and Opportunities in the Carpet Value Chain
Constraint/Gap Opportunity
Limited supply of high-quality Afghan raw wool
Lack of improved scouring facilities
Spun yarn imported from Pakistan
Expertise to use and to source natural dyes is limited
from Pakistan
inefficient
Dyed yarn imported
Traditional techniques for design development and copy are
Lack of Afghan design capacity decreases opportunity to respond
to changing international design preferences
17 18
Increase flock size
Grade and brand Afghan wool
Facilitate establishment
of facilities utilizing improved technologies for washing/drying/storing wool
Increase quantity of hand-spun wool in Afghanistan by introducing and testing
spinning wheels19
Institute an apprenticeship program to expand the number
of people with expertise in using, sourcing, and marketing natural dyes
Facilitate establishment of a medium-size facility to produce naturally-dyed
hand-spun yarn
Explore feasibility of Computer Assisted Design technologies
to speed-up design drawing and copying process
Provide opportunities for
several artisans to further develop their design expertise through
regionally-based training
Develop Afghanistan-based design services to
collect market information about designs and colors for Afghan
Available: http://www.trade.gov/static/afghanistan_carpetstextiles.pdf ASMED.
September 2007. Presentation: Investment Opportunities in Afghan Carpet
Sector. Kabul. 19 The Indigo Carpet Association, based in Kabul, produces and
promotes hand woven carpets using hand-spun wool and natural dyes. The
Association has experience with spinning wheels, having provided spinning
wheels to women with whom they work in Herat. These women were able to
increase their production of spun wool by 400%, thereby significantly
increasing their incomes. USAID. January 2008. Accelerating Sustainable
Agriculture Program: Annual Report 1, November 22, 2006
December 31, 2007.
Kabul
Balkh Carpet Value Chain Prefeasibility Study
19
Constraint/Gap
Limited attention to weaverrelated issues
Opportunity merchants/weavers
Boost motivation for weavers to produce high-
quality carpet by facilitating loom ownership, providing targeted training to
improve weaving skills, facilitating weaver access to higher-quality inputs,
and initiating an association-based quality improvement and control program
Facilitate establishment of medium to large-scale facility providing feebased quality finishing including labeling services to production units,
traders, and associations
The potential demand for cut and wash facilities
in Balkh beyond the 5000 sq.m. capacity that exists is estimated at 55,000 sq
m per month20.
Assist merchants to initiate/improve direct marketing
activities including website development, linkages to international web-based
marketing, inventory management, branding, sea and air shipping, and customs
clearance procedures
Strengthen merchant capacity to articulate market
issues and concerns to related national agencies and government
Afghan participation in international trade shows
Facilitate
Assist existing, organize
new associations to strengthen trader/weaver capacity to produce, negotiate,
and market
Develop groups/associations to empower weavers to advocate for
better wages, working conditions, and/or to initiate direct marketing
Broker
linkages among weavers/merchants and credit suppliers
Limited number of highquality cut and wash facilities in Afghanistan; in
Balkh the capacity of the existing cut and wash facilities is about 5000
sq.m. per month;
Most carpets sent to Pakistan for finishing
Afghan
merchants linked primarily to Pakistan, not directly to international markets
Afghan merchants unable to effectively advocate with Government
Limited capacity of existing trader unions/associations
groups/ associations
Few or weak weaver
Lack of capital
20
MRRD. 2007. Feasibility Study for Carpet Subsector Plan: Operationalizing Cut
and Wash Facilities. Subsector Analysis and Business Plan Development/ North
and Northeast/Economic Viability and Technical Feasibility.
Balkh Carpet Value Chain Prefeasibility Study
20
7. OTHER DONOR PROJECTS 7.1. Carpet Sector Development: National Level
There
are
sector
at
three
the
Competitiveness
Enterprise
in
2008;
major
nationallevel.
Project,
Development
and
projects
the
addressing
These
completed
Program
Afghanistan
are
in
the
2006;
(AREDP)
Small
development
(ASMED) project currently in operation.
the
Medium
was
completed
in
2006.
The
carpet
Afghanistan
to
begin
Rural
implementation
Enterprise
Development
The Afghanistan Competitiveness
Project, funded by USAID and carriedout by the OTF
and
the
Afghanistan
planned
and
of
project
helped
Group,
began
develop
in
2004
a
nationallevel strategy for growth of the carpet sector, provided
institutional support to
the development of the Afghanistan Carpet Committee
in the Ministry of Commerce, and
supported
an
outreach
effort
to
address
general
instrumental
competitiveness
in
establishing
issues.21
the
The
national
project
framework
Afghanistan's carpet industry is currently operating.
Rural
Rehabilitation
and
Development
(MRRD)
is
was
very
within
The
in
which
Ministry
of
process
of
the
developing the AREDP which is to be funded by a group of donors. This is a
largescale
national program, designed for a 10year period with a funding
base of $568 million, to
facilitate enterprise development in rural
communities, to support policybased lending
enterprises,
and
enterprises.22
operate
at
to
provide
This
the
a
national
range
and
efforts,
some
activities
that
test
quarter.
close
of
in
AREDP
its
the
will
As
begin
AREDP
Enterprise
be
currently
have
in
between
the
Development
two
be
RBSP
intends
must
Details
of
in
a
the
ensure
USAID
AREDP
Plans
are
fourth
there
Afghanistan
(ASMED),
to
pilotproject
likely
projects.
project
AREDP
determined.
2008,
implementation,
and
on products in
operation.
to
to
communities
through
in
and
services
carpets.
yet
implementation
begins
reach
methodology
carpetsector
collaboration
Medium
are
business
will
will
project
which
communities
AREDP will focus
strategic subsectors, among these
develop
of
program
communitylevel.
to
is
Small
and
funded project,
is an important actor in the carpet value chain, as well as in other value
chains
in
Afghanistan.
development
activities
development,
alliance
ASMED
the
in
in
Kabul
and
nationallevel
ever
The
business
five
sector
to
workforce
associations
in
service
capacity
trade
International
assists
economic
publicprivate
international
Afghanistan
project
main
business
development,
delegations
first
2007.
private
on
marketing,
association
sponsored
sponsored
focuses
including:
business
creation,
has
ASMED
the
provider
sector
development.
fairs
Carpet
and
Fair
development
held
of
such as the Afghan Carpet Exporters
Guild, the Kabul Carpet Association, and the Export
Promotion Agency of
Afghanistan. ASMED is interested in a strategic alliance with RBSP
in
to
support
related
to
the
the
development
small
and
medium
enterprises
carpet sector there. The concept is one of a joint venture whereby
the two projects pool
enterprises
21 22
of
Mazar
which
resources
will
support
to
the
facilitate
carpet
the
development
of
Available: http://www.trade.gov/static/afghanistan_carpetsummary.pdf MRRD. No
Date. Draft Program Document. Afghanistan Rural Enterprise Development
Program. Kabul.
Balkh Carpet Value Chain Prefeasibility Study
21
sector.
cut
and
with
ASMED
is
wash
particularly
operations.
investors
interested
ASMED
interested
in
in
advises
collaboration
they
are
related
currently
to
working
establishing finishing facilities in Mazar.
As well as these carpetfocused project activities, the ASAP project has a
website, AgNet,
developed
internationally.
The
to
Project
assist
Afghanistan
merchants
in
marketing
will have access to this website.
7.2. Training/Capacity Development
7.2.1.
NationalLevel
Several Ministry of Agriculture, Irrigation, and Livestock (MAIL) associated
training and
RBSP
and
capacity
activities
Livestock
Project
development
operate
Program
(PHDP),
and
at
(HLP),
Support
the
programs
nationallevel.
Perennial
to
potentially
These
are
Horticulture
Strategic
Planning
relevant
to
Horticulture
Development
for
Sustainable
Rural Livelihoods (SSPSRL). None have plans to intervene specifically in the
carpet sector. However, each has relevance to RBSP training and capacity
development
as is further explained below.
Both HLP and PHDP advise they
have plans to help develop farmer organizations in the
districts in which
they will be working. Their efforts will focus on utilizing organizations
the
mechanisms
organization
RBSP
is
for
delivery
development
invited
to
of
training
collaborate
technical
be
more
with them.
training.
general
Should
in
their
nature,
SSPSRL has been
instrumental in developing a core group of trainers who are currently
then
as
assigned
to
different
Development
Unit,
a
departments
within
MAIL.
The
Capacity
planned unit in MAIL's newlyestablished Human
Resources Department, is expected to
be the ultimate homebase for these
trainers. SSPSRL has initiated a longterm capacity
development effort
whereby DAIL lead trainers are trained in training of trainers (TOT)
each
province.
General
Following
training,
lead
trainers
are
trained
in
Management and Project Management. Two lead trainers have been
trained in Bamyan.
and
TOT
in
their
obtained
These
involvement
whenever
trainers
in
are
Project
possible.
MAIL
an
important
supported
has
resource
training
advised
for
should
SSPSRL
RBSP
be
they would like
two provinciallevel M&E staff to be trained. Staff have yet to be posted
to the field, but plans are to do so. SSPSRL does not currently have plans to
provide M&E
MAIL
and
training.
collaborate
This
with
is
an
area
where
RBSP
can
assist
SSPSRL
by
ensuring MAIL staff are included in
Project M&E training and M&E implementation.
7.2.2.
Balkh: Provincial and DistrictLevel
The foremost player in carpet in Balkh is ASMED. Balkh is one of five
regional centers
above,
ASMED
development,
alliance
where
is
ASMED
engaged
business
creation,
in
projects
marketing,
association
and
are
private
implemented.
business
development,
sector
As
service
noted
provider
publicprivate
workforce
capacity
sector
development.
All these developmental activities will reportedly be carriedout in Balkh
and will focus, among others, on the carpet sector.
Balkh Carpet Value Chain Prefeasibility Study
22
Community
Solidarity
Development
Program,
districts in Balkh.
Council's
and
women's
provides
Councils,
have
training
to
through
the
MRRD
National
been involved with carpet weaving in some
This has
shura.
supported
usually
The
been
Council
weavers,
accomplished
purchases
primarily
by
looms
women.
the
and/or
Carpets
inputs
are
sold
in local markets, usually in Mazar.
The development community in Balkh is
large and active. However, current information
other
NGOs/organizations
engaged
directly
suggests
in
there
carpet
are
sector
no
development
in Balkh.
7.3. Existing Institutional Capacity
Neither
MAIL
trained
in
nor
its
weaving.
Department
Most
provincialdepartments
are
women
at
the
in
employed
MAIL
in
provinciallevel
and
the
in
has
staff
its
Department of Home Economics.
Building the capacity of women in this department to
work with women weavers
is an option which merits consideration.
7.4. Existing Groups/Associations
The
Carpet
Producers
organization
with
others,
of
and
traders
there
Exporters
Union
representing
are
about
360
is
allegedly
traders
from
the
the
North.
Ministry of Commerce.
Union headquarters are in Kabul with satellite offices in Mazar,
Herat.
The
established
some
working
traders
trader
President
the
Union
relationships
having 1,500
organization
Export's
of
is
Development
with
advises
large
trader
numbers
2,000 working looms.
the
Afghan
Association.
Along
Mazarbased traders in the Union.
Established in 1967, the Union is registered with the
and
largest
Hand
This
Knotted
members
of
The
is
have
weavers
second
Carpets
Association
Jalalabad,
with
largest
Manufacturers
headquarters
in
Aqcha in Jawzjan Province. The Association represents 66 traders and 100,000
weavers.
The
large
northern
areas,
majority
other
than
some weavers in Mazar.
organized
Dawlat
to
Abad
been
association
Mazar,
There
specifically
have
of
are
address
organized
activities
are
in
although they reportedly work with
few,
weaver
via
if
any,
concerns.
Community
associations
Some
weavers
Development
Councils
but these are very few and they lack organizational and business skills.
Balkh Carpet Value Chain Prefeasibility Study
23
in
8. CREDIT MAP: BALKH CARPET23
The MISFA microfinance organizations working in the province Project
provinces have
products
been
(Tables
surveyed
67).
to
Note
obtain
that
information
on
and marketers will be seeking
loans from organizations providing loans large than MFIs
The
and
NBFIs
minimum
clients
equity
may
transfer
were
is
on
exactly
how
discussions
an
The
equity
MFI
many
with
to
critical
necessary
organizations.
know
is
require
it
surveyed
to
information
know
reports
MISFA
This
will
be
an
the
clients
the
their
as
To
the
SME/commercial
minimum
these
equity.
potential
justify
the
equity
minimum equity required by these
through
MISFA
the
will
MFIs
let
provide
the
Project
loans.
Based
Project will be able to request and obtain
specific information about the number
chains.
determine
transfer.
Project
loan
Banke Millie also has a loan product and
is operating in Balkh. Because the processors
banks
their
added
and
size
requirement
of
on
loans
the
in
its
value
MFIs and a
condition of the MISFA contract. The extent of any additional detail
may be
problematic when negotiating with MISFA24. Note that since the Project
have
no
relationship
institution
no
report
outside
on
their
with
MISFA
Banke
or
for
Millie
loans
or
any
above
other
the
will
financial
MISFA
MFI
limit
participation in the Project will be available.
23
Where possible the numbers provided by the MFI were checked against those
reported to MISFA. Where different the MISFA numbers were used. 24 MISFA has
had a bad experience with ADB in the past in terms of delays and people
changing their minds. This will not give the Project much room to make
demands.
Balkh Carpet Value Chain Prefeasibility Study
24
Table 6. MISFA Loan Status
District
No
District
2
3
4
5
City Districts
Khulm
Shortapa
Kushenda
Active
1
7
Charbolak
9
10
Chemtal
12
13
14
15
Dawlat Abad
Kaldar
Shulgara
Dehdadi
Marmal
Total
29,351
4,957
1,089
7
11
Nahrishahi
Zari
(total)
3,675
8
Balkh
Chargumbad
Clients
6
1,781
1,501
22
6,090
3,313
2
15
51,803
Active
Borrowers
(total)
2,802
935
1
2
23,389
4,084
1,416
1,111
4,720
3,137
41,597
Loans
Disbursed
(number)
8,184
76,382
6,139
7
19,281
3,205
5,123
7
8,968
21,003
1
4
148,304
Loans
Disbursed
1,038,226
($)
36,048,132
2,057,536
4,000
5,362,233
1,031,146
4,300
2,542,371
2,623,617
5,850,750
500
2,100
56,564,912
Loans
Outstanding
($)
273,589
701,913
416
1,172
9,913,288
1,106,255
786,862
234,781
800,546
15,157,088
Source: MISFA Consolidated as of March, 08
1,338,266
At the association formation stage all microfinance financial institutions
will be invited
producers.
It
to
introduce
will
then
be
themselves
and
up
MFIs and the producers to connect
to the
their
products to
the
and access credit.
Balkh Carpet Value Chain Prefeasibility Study
25
Table 7. MFIs in the Districts
Area
Dawlat Abad
Group
Monthly
X
X
District
Individual
Frequency
X
Terms
Loan Sizes
Repayment Rate
FINCA
MISFA
FMFB
FMFB
MF
OXUS
WOCCU
Banke
X X
X
X
X X
X X
X X
X
Millie
X
SME
Microfinance
ARMP
Nahrishahi District
Months
424
1st Loan Max.
BRAC
X
Interest25
MFIs Operating in
Types of Lending
15.6 F
Number of Clients
Payment
X
X
X
X
612 17.5 F Weekly
512 24 F Biweekly
412 15 F Monthly
636 15 F Monthly
618
18 F
Biweekly/
612 24 D Monthly
12 12 D Monthly
$500
$20
$160
$200
$30,000
$100
$500
$5,000
3,890
59.6%
20,738 96.7%
Monthly
6,511 65%
6,522 100%
49 100%
2,643
74.15%
1,275 99.35%
N/A N/A
SME/Commercial
AIB
debt
AFC
20%
ARFC
Azizi
BRAC
Millie
service
Minimum equity
ratio
50%
30%
Bank
25%
66%
Nat'l
Bank
Kabul
50%
Pashta ny
Note:
Banks and NBFIs
Pakistan
N/A
70%
See Annex 2 for details.
25
F = Flat, D = Declining
Balkh Carpet Value Chain Prefeasibility Study
required
26
9. PROPOSED INTERVENTIONS
The
Project
districts
will
with
respectively.
districts
Weaving
a
is
Abad
the
less
Dawlat
is
have
trained
of
has
major
increasing.
in
the
in
most
and
66,009,
and
weavers
of
and
newlysettled
Shahi
38,791,
all
district
Nahri
Nahri
Balkh
in
Shahi,
Afghans
in
Balkh.
although
Nahri
its
Shahi
weaving. The Governor of Balkh has allocated
land for a carpet weaving village in Nahri
infrastructure--housing,
Dehdadi,
producing
Dehdadi
Many
carpet
Abad,
79,638,
carpet
widespread
importance
been
in
population
Dawlat
and
is
operate
power,
and
Shahi.
water--are
Reports
are
beginning
to
be
developed. Dawlat Abad and Dehdadi also have a significant number of sheep,
adding to
the
locations
is
district
availability
good.
where
of
Electric
the
raw
power
fertilizer
plant
wool.
is
Road
most
is
access
to
these
available
in
Dehdadi
located.
Water
is
abundant in
Dehdadi, much less so in Dawlat Abad and Nahri Shahi.
9.1. Description
9.1.1. Production
The Project will assist weavers to access highquality carpet inputs such as
looms, yarn,
and designs. Via the Project, weavers will learn about and
testout new spinning wheels
to increase their spinning productivity. Through
an extension program, the Project will
increase weaver capacity in various
wool valueadded activities, emphasizing improved
dyed
and
spun
wool.
To
create
a
core
of
dying
advanced
and
marketing
weavers,
of
selected
weavers will be trained in carpet weaving Best Practices. A critical
component
trained
of
the
Project
extension
and
program
be
qualityimprovement
whereby
MAIL extension staff will technically backstop the
weaving process and assist weavers
9.1.2. Processing
will
to improve the quality of their carpets.
To
establish
Project
the
will
feasibility
support
a
impact
wool
feasibility
(washing/drying/storing)
environmental
of
and
will
assessment.
scouring
study
support
If
of
a
operations,
wool
wool
feasible
the
scouring
scouring
and
if
facility
any
negative
environmental impacts can be appropriately mitigated, the Project will assist
investors
To
in establishing facilities in appropriate and strategic locations.
facilitate
Project
the
will
facility.
establishment
support
If
an
negative
of
a
cut
environmental
environmental
and
impact
impacts
wash
facility,
assessment
of
the
such
can be appropriately
mitigated, the Project will assist investors in establishing a cut and
facility in an appropriate and strategic location.
scouring
staff
and
to
finishing
operate and
environmental
issues
facilities,
maintain
as
the
Project
facilities.
well
as
For
both
will
Training
the
train
will
wash
facility
consider
Best Practices.
9.1.3. Marketing
The Project will work closely with existing trader unions and associations to
build their
the
organizational
Project
Carpet
will
traders
assist
will
and
in
be
business
capacity.
developing
trained
in
As
additional
may
be
marketing
needed,
groups.
various
Balkh Carpet Value Chain Prefeasibility Study
27
procedures to improve their valueadded activities and volume of sales.
Procedures will
customs
include,
clearance,
marketing
will
be
and
for
example,
marketing
emphasized.
by
inventory
air
Traders
and
management,
sea.
Ecommerce
attend
learn
with
national
how
to
ASMED,
trade
engage
the
fairs.
Project
The
direct
will be assisted to develop
websites and they will be linked to international markets via
collaboration
branding,
will
Project
support
will
help
AgNet.
Balkh
Balkh
traders
traders
Government in constructive dialogue and how to
articulate their positions and concerns
9.1.4. Association Development
to Government.
In
to
The
strengthening
new
weaver
Project.
and
By
of
existing
trader
the
end
and
the
associations
of
the
organization
will
Project,
be
a
development
priority
of
of
the
Associations will be
selfsustaining.
9.1.5. Staff Capacity Development
To implement the Project successfully, training will be provided for various
Project staff
primarily
in
wool
selected
dying
aspects
and
of
spinning
the
and
carpet
value
chain,
carpet weaving and marketing. To
the extent possible, Project staff trained for this value
chain will be
women as they can work with women weavers more readily than can men.
The
Project will train DAIL female staff to participate in the Project on a
parttime basis.
This will help build capacity in the industry in general and
in DAIL in specific.
9.2. Strategic links to existing programs
Consideration
Afghanistan
should
Carpet
be
given
across
all
AREDP
its
MAIL's
participation
on
the
Committee. As AREDP becomes operational, the strategic
linkages between the projects
detailed.
to
proposes
will
to
need
integrate
activities.
This
is
to
be
further
business
an
area
discussed
development
where
RBSP
services
clients
well benefit and offers one specific area for strategic linkages.
further explore
and
may
RBSP will
the concept of joint venture with ASMED to facilitate the
development of wool scouring
and/or cut and wash facilities in Mazar. The
AgNet website, developed by ASAP, will be
available for use by RBSP clients.
9.3. Stakeholders Interest in Value Chain Improvement
The
with
Carpet
RBSP.
Producers
Within
and
Exporters
Union
is
ready
to
collaborate
this group are merchants who are eager to build their
businesses and learn more about
international markets.
contacted were interested in Project participation.
All weavers
They asked many
questions regarding the conditions of participation and were advised
information would be forthcoming as such decisions are finalized.
of the carpet traders in Balkh advise they are
this
Several
interested in establishing
better
facilities
Balkh.
Merchants
for
in
wool
the
scouring,
spinning,
dying,
and
storing
in
province have also indicated interested in
establishing cut and wash facilities in Balkh. .
Balkh Carpet Value Chain Prefeasibility Study
28
10. INDICATIVE NUMBER OF POTENTIAL BENEFICIARIES
There are an estimated 26,350 families in the three target districts. The
Project plans to
involve
qualityimprovement
around
focused
600
of
extension
these
intends
to
support
200
in
a
program carriedout largely by female
extension workers. On a more intensive level for
Project
families
weavers'
fewer
access
weavers,
to
the
highquality
inputs
(looms, spinning wheels, designs); improve 200 weavers' skills in various
value added activities (cleaning, dying, spinning); and train 300 weavers in
Best Practices in
order
support
the
ten
weavers,
carpet
weaver
to
improve
Project
weaving
plans
associations,
to
quality.
promote
involving
up
the
to
To
further
organization
1,000
of
weavers and to
assist existing carpet marketing associations to develop more effective
associations, involving up to 100 traders and weavers.
The Project plans
to work with eight groups of investors to facilitate the development, if
feasible, of a wool scouring facility, of five drying and storage warehouses,
and two
cut
and wash facilities. The number of direct beneficiaries will be
dependent on the number
will
impact
a
far
of
larger
beneficiaries will
be
in
general.
with
the
north
existing
traders
to
in
trader
improve
investors
number
in
of
each
These
traders and weavers not only in Balkh
The
Project
associations
their
and
activities
beneficiaries as secondary
expects
Province
but
to
work
intensively
specifically
with
twenty
capacity to direct market as well as negotiate
effectively with Pakistani buyers.
Balkh Carpet Value Chain Prefeasibility Study
29
group.
11. RECOMMENDATIONS 11.1. Feasibility
Those weavers who purchase a steel loom for $300 will need to service their
loom loan
off
at
and
will
25%.
outright
help
Within
own
establish
two
the
two
years
loom.
cut
the
The
and
wash
weavers
are
investors,
facilities
able
who
to
the
for
pay
Project
$105,000 each,
are each projected to cut and wash 90,000 sq.m. per annum. The cost of
cutting
carpet
and
washing
for
labor,
consumables.26
The
90,000
sq.m.
electricity,
capital
is
and
projected
to
chemicals,
investment
be
$4/sq.m.
water,
and
of
various
includes land, building, drainage,
equipment, washing material, cutting machine, power
stabilizer, etc. A loan
on $70,000 will cost the investor 25%. At a cut and wash price of
$4.89/sq.m.27, and operating and interest costs of $4/sq.m. and $0.194/sq.m.,
resp., the
return on investment is 179%.
11.2. Cost Effectiveness
The
Project's
guaranty
of
investment
about
cost
includes
carpet
packing
for
cut
and
house,
investment
the
wool
Project
is
transfer
or
a
scouring
wash
and
equipment
facilities,
$25,000
for
in
wool
and
$25,000
branding
$377,250.
interventions
dying,
and
drying
building,
for
carpet
estimated
the
carpet
increase
value
storage,
$50,000
access their wool and other inputs
Total
in
chain is
two
and
for
revenue
form
$4,046,130.
Weavers
independently
Availability of water for cut and wash
Willingness of carpet traders to keep
carpets in Balkh for cutting and washing and
to Peshawar with
for
inventory
advertising.
The
and
11.3. Risk Manageability Table 8. Risks and Risks Management Risks
the
loan
$58,500 for inputs including looms, $67,250 for wool
cleaning, scouring, wool spinning
$100,000
equity
marketing versus exporting
existing arrangement
How Managed The Project will assist those weavers in
inputs and linking the weavers
accessing quality
with cut and wash and exporters that market
branded Afghan carpets directly to the
may need to be drilled by cut and
international buyers
wash operators
Water wells
The Project will
identify international buyers
the
willing to buy direct from Balkh and assist
cut and wash investors and carpet exporters
efficient and cost
access necessary inputs and
effective international shipping arrangements
from Balkh
26
MRRD. 2007. Feasibility Study for Carpet Subsector Plan: Operationalizing Cut
and Wash Facilities. Subsector Analysis and Business Plan Development/ North
and Northeast/Economic Viability and Technical Feasibility. 27 Landell Mills,
Ltd. 2007. Preparing the Commercial Agricultural Development Project, Main
Report, Phase 2. Asian Development Bank Project.
Balkh Carpet Value Chain Prefeasibility Study
30
11.4. Financial Viability
The various value added activities in the wool portion of the carpet value
chain are not
high return activities. However, spinning wool by use of
spinning wheels rather than by
to
increase
looms
their
gives
become
their
a
direct
through
to
and
the
marketing
can
Also,
chance
independent
carpets
with
incomes.
them
more
hand
helping
build
able
Project
wash
facilities
buy
is
their
an
opportunity
buy
their
own
their
trade
and
own
local
inputs
and
marketing
sell
agents
A study is needed to determine
The
high,
in
assisted,
opportunities.
women
weavers
equity
to
the feasibility of wool scouring.
and
provide
return
assuming
the
on
investing
difficulties
carpets does not present a problem in the winter.
in
in
cut
drying the
The marketing of
carpets direct from Balkh to the international buyer is more expensive
the
shipping
the
extra
Afghan
trade
cost
costs
products
barriers
from
Peshawar
incurred
through
are
by
the
pulled
to
Afghans
Karachi
down
as
the
in
port
international
shipping
are
Pakistan
containers
likely
comes
buyer.
to
than
However,
of
drop
as
under mounting
pressure from the international community. Afghan carpets can enter
without import duties, making Afghan carpets more competitive.
the US
11.5. Environmental Issues
The
feasibility
environmental
assessment
wool
impact
will
establishment
for
of
be
scouring
assessment.
conducted
any
cut
and
will
be
Similarly,
before
wash
the
accompanied
an
environmental
Project
facilities.
with
supports
In
both
an
impact
the
cases,
mitigation measures will be needed to be put in place along with the
investments.
Balkh Carpet Value Chain Prefeasibility Study
31
ANNEX 1: VALUE CHAIN FOR BALKH CARPET
Wholesale & Retail Markets
Generic Chain Functions
Inputs Provision
Provide -Equipment -Inputs
Production
Weave Carpets
Transformation
Wholesale/Retail Market
Transport Distribute Sell
Cut & Wash
Chain Operators CONSTRAINTS OR GAPS
(Credit & marketing are common constraints across the value chain.)
Input Provider
Limited Afghan wool
facilities
inputs
Most inputs imported
Limited wool dying/ spinning capacity
Increase flock size
facilities
Few improved wool scouring
Grade and brand Afghan wool
Increase spinning/dying capacity
access to quality inputs
Limited access to quality
Develop scouring
Improve value chain actor
TA to increase availability of high-quality inputs
Conduct feasibility study and environmental impact assessment of wool
scouring facilities
Assist investors in establishing wool scouring
(wash/dry/store) facilities
Primary Producer
Two few weavers pro-duce high quality carpet
training opportunities
Low quality looms etc
Limited access to markets/updated design
Few
Lack
organization
Processor/Trader
Few quality cut/wash facilities in Afghanistan
Pakistan for finishing
quality poor
facilities
Most carpets shipped to
Costs of imported cut & wash chemicals high &
Afghan branding lacking
Facilitate establishment of finishing
Brand finished carpets in Afghanistan
Drying and storage of
carpets in Afghanistan
Trader
Limited access to external markets
High transport cost
Linkage only to Pakistan limits profits
Limited influence with GOA on industry issues
OPPORTUNITIES FOR VALUE CHAIN IMPROVEMENT
Facilitate loom ownership
Target training to improve weaving skill
Facilitate access to higherquality inputs
association-based quality control
Build associations & initiate
TA to increase high-quality production
Increase access to quality inputs (looms, wool, yarn)
value (wool dying/ marketing, spinning)
Build capacity to add
Assist associations
Expand sales to other regional and to international markets
to advocate with government
activities
Assist traders
Assist merchants to improve direct marketing
TA to expand existing and establish new markets
Linking traders
to international markets using new technology and coaching
STRATEGIC INTERVENTIONS
(Broker access to credit and support marketing activities across the chain.)
Conduct environmental impact assessment on cut/wash facilities
investors in establishing cut/wash
Assist
Train cut/wash operators to improve
quality
Balkh Carpet Value Chain Prefeasibility Study
32
ANNEX 2: CREDIT MAP: BALKH CARPET28 Financial Institution: ARMP (Afghanistan
Rural Microcredit Program)
Provincial level:
# of clients: 3,890
clients in target districts
Average Loan size: about $670
Personal
3rd
Loan size (cycles):
Loan Product Terms:
Payments
party
Months
1.3%
Monthly 152
1.3%
Monthly 3,111
$131,000
Individual
reference
Loan
from
Guarantee:
Shura with
Collateral: title deed or property: house or
First: $500 maximum
$350,756
Animal
Second +: up to $3000
Grace period
Value outstanding
Monthly 617
1.3%
guarantee,
Minimum equity
# of clients
Overall: 59.6%
Type of Lending: Groups of 48 people 15%,
promise to help in recovery.
shop
Repayment rate:
Group Loan Guarantee: Group
guarantee,
# of
Dawlat Abad: 443 as of March 2008
Nahrishahi: 776 as of March 2008
Individuals 85%
$2,360,674 outstanding
Term
Interest rate: Flat
Business Loans 50% 1 Month
Agriculture 50% 412 Months
Husbandry
50% 48 Months
412
624 Months
624 Months
$1,866,871
* Previously had housing loans but cancelled, 10 loans remain outstanding
with a value
$12,048.
Other information: Loan officers come from district in which they work
Financial Institution: BRAC
Provincial level:
# of clients: 25,340
clients in target districts
$3,907,053 outstanding
# of
Dawlat Abad: 643 as of March 2008
Nahrishahi: 2,819 as of March 2008
Repayment rate:
Overall: 96.7%
Average Loan size: about $188
28
Where possible the numbers provided by the MFI were checked against those
reported to MISFA. Where different the MISFA numbers were used.
Balkh Carpet Value Chain Prefeasibility Study
33
Type
of
Lending:
subgroups
of
5)
Individuals
and
with
individuals
group
guarantee
Loan size (cycles):
First:
$20
$300
$variable
Maximum
Urban
Loan Product Terms:
Flat
Payment
6 Months
9 Months
Livestock
year
17.5%
$1,000 maximum
$600
# of clients
24%
0
Monthly
Other information:
Rural
N/A
$500
Grace period
17.5% 47 over 1 year
Agriculture
Increments
Value outstanding
6 Months
SME loans require a
Poverty Alleviation
Minimum equity
with
Individual Loan Guarantee:
Collateral: In some cases land title, shop, license
guarantor
(1535
N/A
$1200
$1,000
Term
1st
$1200
$10,000
2nd
Admin:
Poverty Alleviation
N/A
17.5% 47 over 1 year
Agriculture:
N/A
N/A
SME
SME
5%
0
Crops,
0
1
N/A
Branch office organizes 2 village groups of 1535 members
in each village. One group is
for poverty alleviation loans and the other
for agriculture loans. Each group is broken
group acts as the initial credit committee
down into small groups of 5. The
two sign as
witness to loan
contracts. Each small group has a leader. These people manage the small
group and make up the management of the village organization.
When a person
joins they must commit to save a specified amount weekly. 6% interest
is
paid on the savings. 5% of the loan size must be in savings. Up to 15% of
savings may
extension
be withdrawn for emergency purposes.
side
of
BRAC
provides
training
The
to
agriculture
crop
and
livestock
borrowers.
Financial Institution: FINCA
Provincial level:
# of clients: 6,511
in target districts
157 clients
clients
Type
group),
# of clients
Dawlat Abad: 0 as of March 2008 Closed operations had
Nahrishahi: 0 as of March 2008 Closed operations had 665
Repayment rate:
of
$ 652,950 outstanding
Lending:
and
Overall: 56.3%
Groups
of
Individuals
1040
Average Loan size: about $161
(women's
group),
310
(market
Group Loan Guarantee:
Balkh Carpet Value Chain Prefeasibility Study 34
Group
Before borrowing group members must save 2% of the future loan. This
amount is used
by the group as insurance against a member's default.
of moveable and immoveable assets
Community leader reference letter.
Individual
Loan
qualify
cycles
group
in
Collateral:
deed
or
Guarantee:
and
120%
Can
of
loan
and
Business
Second: $300
$700
Women's
23%
Individual
Business
Biweekly
include
consumer
Loan size (cycles):
$8005,000
Minimum equity
612 Months
1st
two
successful
items
and
title
Women's Group
$400
$1,200 maximum
Third: $500
$1,000
Average Loan size: about $300
Loan Product Terms:
Payment
can
First: $160
Fourth: $800
Markup: Flat
after
reference of neighborhood or village Shura.
property: house or shop
Market Group
only
Pledge
Group
70% of
Market Group
2nd
Monthly
N/A
0
# of clients
N/A N/A
70% of
Grace period
inventory
0
inventory
69 Months
Term
0
612 Month
Value outstanding
1st
2nd
3rd
69 Months
612 Months
5 Months
610 Months
Up to 18
Months
2%
3%5 Months
2.33% 6 Mo's
2% 8 Months
2%10 Mo's
Biweekly
Monthly
N/A
N/A
Biweekly
N/A
N/A
Other information:
Primary market is urban.
loan methodology.
Use Sharia compliant Muragahah
Markup on delinquent loans cannot be compounded.
Administration costs are included in markup.
has a three tier rating system.
client at cost plus markup.
loans
and
may
start
FINCA buys the produce and sells to the
Looking
in
For client performance, FINCA
4th
at
Qtr
SME
2008
and
or
housing
early
renovation
2009.
Financial Institution: FMFB (First Microfinance Bank)
Balkh Carpet Value Chain Prefeasibility Study
35
Provincial level:
# of clients: 9,937
$7,165,335 outstanding
clients in target districts: N/A works in urban areas only
Microfinance loan: $251
Average SME loan: $ 15,492
Overall: approximately 00%
$2001500
Microfinance
term
5%
Minimum equity
0
412 Months
20.4% Declining
Payment
# of clients
Monthly
6,522
for
Maximum
$5,000
Grace period
15% Flat
medium term
Microfinance
Monthly
SME
49
0
Term
SME
$50,000
Interest
636 Months
15% Flat short
$759,138
Value outstanding
$6,462,479
Other information:
and
Repayment rate:
Loan size (cycles):
$3,00030,000
Loan Product Terms:
Average
Type of Lending: Microfinance: group and
individuals SME: Individual
First:
# of
Most
handicrafts.
of
Other
the
microfinance
areas
are
loans
are
to
retailers
services and transportation.
SME loans are traders as well as manufacturing and services.
Most
Financial Institution: OXUS (Sponsored by ACTED)
Provincial level:
# of clients: 2,643
in target districts
March 2008
Dawlat Abad: 0 as of March 2008
Repayment rate:
size: about $192
individuals
$460,270 outstanding
Nahrishahi: 0 as of
Overall: approximately 74.15%
Average Loan
Type of Lending: Individuals with group guarantee and
Individual Loan Guarantee:
Collateral: In some cases land
title, shop plus two personal guarantors who are
(cycles):
Group
to 20 cycles
# of clients
$600
Individual
local leaders
First:
Loan size
$100
$50
Up
$500
Loan Product Terms:
Balkh Carpet Value Chain Prefeasibility Study
36
Minimum equity
Grace period
Term
Admin: Flat
Payment
# of clients
Value outstanding
Group
50%
Individual
1 month 6 Months
50%
18%
0 1218 Months
biweekly
18%
Monthly
3,100 $410,000
300 $240,000
Clients by activity: Agriculture 66, livestock 54, handicraft and
manufacturing 72, trade
and services 2448.
Other information:
Group loans
are made up of groups of 5. The group receives the loan with allocations to
each individual.
to corruption.
fringe.
Have two branches in Mazar. One is being restructured due
Although
Agriculture
primarily
activities
in
are
the
city
some
groups
on
the
encouraged
Financial Institution: WOCCU (Islamic Investment and Finance Cooperatives)
Provincial level:
# of clients: 3,482
in target districts
of March 2008
$610,804 outstanding
Dawlat Abad: 0 as of March 2008
Repayment rate:
Type of Lending: Individuals
Guarantee:
reference
Character
Nahrishahi: 10 as
Overall: approximately 99.35%
Loan size: about $484
Shura,
mullah,
Individual
trade
# of clients
union
Average
Loan
or
mayor,
cash flow analysis.
(cycles):
All
employees'
loan
loan
maximum
Collateral: In some cases land title
has
a
are
the
same
except
government
maximum of 35% of annual salary
First: $500
Open there after to 20% of the loan portfolio but usually not over
$3,000. Normal
maximum is $1000
Loan Product Terms:
6 Months
Months
products
Loan size
9 Months
2%
Government
2%
Monthly
2%
Monthly
Monthly
Trade, Service,
Agriculture:
employees salary loan
Minimum equity is
Admin: Declining
Business:
called pledge savings
0
Manufacturing
24%
Crops, Livestock
24%
0
0
6
1 year
Grace period
Term
1st
2nd
Payment
Balkh Carpet Value Chain Prefeasibility Study
37
# of clients
1632
733
0
Value outstanding
$1,079,175
$589,280
0
Other information:
Membership is 100 Afs ($2)
is 1,000 Afs ($20)
Use Sharia compliant Muragahah loan methodology.
on delinquent loans cannot be compounded.
in markup.
Markup
Administration costs are included
WOCCU buys the produce and sells to the client at cost plus
administration costs.
committee meeting.
Loans above $1,000 require WOCCU to be at the credit
All savings are referred to as either active share
savings or term share savings.
As part of the ARIES project the first year
and a half of operating costs are paid by the
credit
Share capital to get a loan
union
must
be
sustainable
and
project.
cover
all
Thereafter
of
its
the
operating
costs.
cost
For the present time profit is put back into primary capital.
of
included
capital
in
(8%),
operating
operating costs.
expenses
(10%)
and
profit
Interest on savings is 7.58%
All
(4%)
are
Staff turnover
is low except for Balkh.
SME/Commercial Banks and NBFIs Financial Institution: BRAC Bank
Provincial level: Unit Office with full branch planed for 2008
# of clients:
77
Dawlat Abad:
$526,000 outstanding
0 as of January 2008
Overall: 82%
# of clients in target districts
Nahrishahi: 0 as of January 2008
Province: 100%
Type of Lending: Enterprises
Guarantee: 3rd party guarantee from 35 people.
or
property:
unregistered
house
shop
Loan size:
Deposit Loan
pharmacies)
or
$4
$10
Repayment rate:
preferably
Enterprise Loan
Collateral:
registered
but
title
will
30,000 Development Loan
$4
deed
accept
10,000 Double
30,000 Medical (licensed hospitals, clinics and
$4
10,000 SME
Balkh Carpet Value Chain Prefeasibility Study
38
Loan Product Terms:
Payments
25% of
N/A
# of clients
inventory
N/A
Minimum equity
N/A
Monthly N/A
N/A
N/A
0
Grace period
Value outstanding
0
312 Months
Double
312 Months
Development Medical 25% of
SME
25% of
inventory
0
Term
Interest rate: Flat
Deposits
20%
20%
inventory
312 Months
25% of inventory
Monthly Monthly
0
20%
312 Months
20%
Monthly N/A
N/A
Other information:
BRAC Bank is strictly urban
Afs per 2,000 Afs borrowed per month.
credit
Kabul
approval.
Bank
In
unit
offices
Forced savings of 1,000
Service charge of 1%
client
must
open
an
Centralized
account
in
which is used for disbursement and repayment. The client signs
standing order for up to
12 months to transfer payments to BRAC Bank.
Afghanistan International Bank (AIB)
AIB's SME loans range from $30300,00029. They do not normally lend to start
ups. 3%
of the loan portfolio is in agriculture. AIB does not have a minimum
equity requirement.
They use the debt/servicing ratio of the cash flow.
Afghanistan Finance Company (AFC)
Minimum equity on leases is 20%
Minimum equity: 50% of total project
Azizi Bank Afghanistan Rural Finance Center (ARFC)
Minimum equity: 25% is the minimum but 30% is the actual minimum. Azizi does
very
little lending outside of Kabul.
Banke Millie
In
2006
$2
million
cases
of
Banke
to
Millie,
in
cooperation
cooperatives
cooperatives
being
for
with
MAIL,
fertilizer.
lent
Apparently
loan
sort
of
a
were
50/50
cost
sharing.
Banke
agriculture
Millie
has
four
products: agriculture, construction, industry and microfinance. The
loan description is
microfinance
as
($1005000),
follows.
and
Agriculture
larger
loans
have
two
types
loans ($5000 and above) backed by
strong collateral or personal guarantees. Both types
of loans have a 1 year
term with 12% interest. Construction loans also have two types
microfinance
(up to $10,000) and larger loans $10,000 and above). Both loans have a 1
29
DAB requires audited financial statements for any company to whom a bank
lends $250,000 or more.
Balkh Carpet Value Chain Prefeasibility Study
39
23
repayment rate, although not
disclosed, was very bad. The bank is reluctant to lend for
some
there
formed to obtain the financing. Many of the
farmers treated the loans as grants and the
without
approximately
5 year term and the interest rate ranges from 1215%. Industrial loans start
at $10,000
rate
is
and
go
1215%.
upward.
The
Microfinance
term
is
13
years
market
and
believe
opening
6
new
developing
a
interest
Millie would not or could not provide
the percentage of their loan portfolio made up by
is
the
loans range from $1005000. They have a 1 year
term with interest rate of 12%. Banke
Millie
and
branches,
Sharia
these
planning
compliant
on
loan
products.
entering
product
Banke
the
leasing
because
they
that it will attract deposits.
Kabul Bank
Kabul Bank has a centralized lending system. A majority of their loans are
overdrafts for
working capital and trade finance. When they do make term
loans the minimum equity
is 3050% with a 12 month term. The interest rate is
1218% with the majority at 15%.
an
account
with
the
bank
To
for
obtain
a
a
minimum
loan
of
6
the
client
must
have
months. Most loans are
in the $2030,000 range.
National Bank of Pakistan
The National Bank of Pakistan has a $20 million loan portfolio and lends at
12%. They
a
soft
would
loan
not
of
provide
them
minimum
equity
approximately 8% from ADB of
interest and repay ADB.
provide
a
with
a
Alternatively
loan
guarantee
the
number.
The
bank
wants
which they would keep 12%
bank
would
like
ADB
to
mechanism. The bank does mostly
working capital loans and only a few term loans. The
term loans that they do
provide are for 1 year because they do not have any long term
deposits to
match their lending.
Pashtany Bank
The Export Promotion Bank was merged into Pashtany Bank in August 2007.
Pashtany
to
become
Bank
a
dropped
full
the
service
"Tejaraty"
bank.
(Trade)
from
its
name
Pashtany Bank currently only lends for
trade and construction. It has a proposal going
to its board that it also
lend into the agriculture sector. Term loans are for 1 year. Trade
loans
require as collateral fixed assets with documents registered with the
Ministry of
Justice. Collateral for trade loans must be 5080% of the loan.
Construction, agriculture
and industrial loans will have a 13 year term with
the minimum equity 5070% and a
12% interest rate.
Balkh Carpet Value Chain Prefeasibility Study